Last I learned, the Chairman of the Federal Reserve Bank is not responsible for fiscal policy. So please enlighten me, what does debt have to do with Greenspan?

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Accomodative monetary policy lowers interest rates, hence encouraging high levels of personal and corporate debt. It is hardly a coincidence that the personal savings rate is at record low levels, even going negative for part of the year.

Anyone know of the expansion of corporate debt going on? Everytime I turn on CNBC or Bloomy, there's always this talk about companies sitting on huge amounts of cash and the criticism of not investing in their own infrastructure. One article: Share buybacks soar 51 percent in 2005.

Accomodative monetary policy lowers interest rates, hence encouraging high levels of personal and corporate debt. It is hardly a coincidence that the personal savings rate is at record low levels, even going negative for part of the year.

Martin

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Yes but the Treasury has been able to borrow at low rates also. Without accomodative monetary policy, Federal budget deficits would have been even higher.

i think he gets too much credit for when things are good and vice versa...however, I think ultimately he will be responsible for the extreme swings his policies caused,....non stop rate hikes to 'explode the bubble" and then over reactive non stop reductions to cause the housing bubble...he should have practiced what he preached and not reacted so over the top to every economic report.

Yes but the Treasury has been able to borrow at low rates also. Without accomodative monetary policy, Federal budget deficits would have been even higher.

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Blue ribbon buddy -

Are we all sure that central bank debt at low levels is necessarily a good thing? Does it depress the 'risk premium' unecessarily? And in a fiat economy, where you can print enough dollars to cover your debt, why should you be covetous of maintaining a low amount of debt, at least until your foreign trading partners start complaining?

Yes, your argument holds in normal scenarios. But when the debt is held principally by another trading partner in an effort to artificially depress their own FX rate (to keep selling imports to you cheaply), what does it mean?